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The Impacts of State Performance Funding Systems on Higher Education Institutions: Research Literature Review and Policy Recommendations

By Kevin Dougherty & Vikash Reddy
Over the past three decades, almost half of all states have implemented some form of performance funding in an effort to improve the performance of their postsecondary institutions. This working paper reviews existing research on performance funding programs in a multitude of states. The studies suggest that tying funding to outputs has immediate impacts on colleges in the form of greater institutional awareness of state priorities and of their own performance, and increased status competition. As a result, colleges in performance funding states demonstrate increased use of data in planning and policymaking, enhanced academic and student services, and implementation of practices that promise to improve student outcomes. The data indicate, however, that performance funding does not increase institutional outcomes such as improved rates of retention, completion of developmental education, and graduation. This working paper identifies obstacles to the effective functioning of performance funding as well as unintended impacts, and concludes with recommendations for how states considering performance funding can overcome and address them.
Download CCRC Working Paper No. 37
December 2011
  • Implementation and Impacts of Performance Funding in Three States

Related Publications

January 2015

Increasing Institutional Capacity to Respond to Performance Funding: What States Can Do

February 2014

Performance Funding: Impacts, Obstacles, and Unintended Outcomes

August 2013

Envisioning Performance Funding Impacts: The Espoused Theories of Action for State Higher Education Performance Funding in Three States

Additional Resources

For more policy briefs and fact sheets, visit CCRC’s Policy Resources page.

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